A State Manager Takes Over and Cuts What a City Can’t

City leaders find themselves powerless as a small cadre of “emergency managers” have been dispatched by the state to put out financial blazes in Michigan’s most troubled cities.

MONICA DAVEY

BENTON HARBOR, Mich. — Every first and third Monday of the month for as long as anyone can remember, this city’s elected commissioners have gathered in their musty second-floor chambers to contend with issues large and small — reports of gaping potholes, proposals to sell city land, an annual budget plan.

But as of this month, they are literally powerless, and hold no authority to make any decisions. Not even on potholes.

The city is now run by Joseph L. Harris, an accountant and auditor from miles away, one of a small cadre of “emergency managers” dispatched like firefighters by the state to put out financial blazes in Michigan’s most troubled cities.

In Benton Harbor, where, records show, finances have spiraled downward in a morass of commingled funds, puzzling accounting and unchecked spending, Mr. Harris has been handed sweeping new powers under recent state legislation that emergency managers like him say was needed to remedy dire situations.

Critics say the new powers, granted by the state’s new Republican leadership, are Michigan’s way to shrink benefits for public workers and undermine the strength of labor unions, just as officials have tried in Indiana, Ohio and Wisconsin.

Michigan’s state-appointed emergency managers do have authority to set aside union contracts, giving the state, in the eyes of some, the opportunity to crush any local union deals in the name of budget repair.

“It’s dictatorship, plain and simple,” said Dennis Knowles, a city commissioner who sat in a darkened, mostly empty City Hall office the other day.

But Mr. Harris insisted that politics and the future of collective bargaining have no bearing on anything he is doing.

“I’m looking at what’s good for Benton Harbor, nothing more, nothing less,” Mr. Harris said. “And until you can break the contracts, your hands are tied.”

Only four entities in Michigan, including Detroit’s public school system, currently are deemed distressed enough to require oversight by emergency managers. But some economists predict those ranks will grow, given cuts in aid from the state and stagnant tax revenues.

Now a fight over the managers is escalating around the state. Last week, pension funds in Detroit filed a lawsuit against Gov. Rick Snyder and others, challenging the measure that, according to the lawsuit, vests the arriving managers with “czar-like powers.”

Others see new career opportunities: last week, 400 people took part in a two-day training session about emergency managers at a Radisson Hotel in Lansing. Some were local leaders trying to keep their towns from needing such financial oversight, while others hoped to become emergency managers themselves.

Around the nation, states have long had a range of methods — from oversight boards to appointed receivers — to step in when cities are teetering near bankruptcy. A financial control board helped pull New York City from the brink in the 1970s. But the powers and duties of such bodies vary widely, as do views about whether they help, long term.

Few places face as severe financial struggles as Benton Harbor, a city of about 10,000 people beside Lake Michigan where almost half the residents are estimated to be living below the poverty line.

A financial review assigned by the state in 2009 found that the city had mishandled federal tax payments. It inappropriately borrowed from money to handle shortfalls in others, and its bookkeeping was sloppy.

And so last year, the administration of Mr. Snyder’s predecessor, Jennifer M. Granholm, a Democrat, sent in Mr. Harris, Detroit’s former auditor general and its former chief financial officer.

Mr. Harris began paying debts, laying off workers and considering a plan to merge the fire and police departments into a single unit where firefighters could ultimately answer burglary calls and police officers could put out fires.

Last November, Mr. Snyder was elected governor and Republicans gained control of both chambers of Michigan’s Legislature. Last month, lawmakers approved legislation to vastly expand the power of emergency managers, which sent thousands of demonstrators to Lansing.

Mr. Snyder said important elements of the bill had been overlooked — it creates ways to gauge fiscal distress in cities before they wind up needing an emergency manager, he said.

And for cities in desperate trouble, sweeping control by an outside manager would make it possible to fix things faster — and avoid devastating prospects like bankruptcy.

“It’s not an assault on collective bargaining, the way I viewed it,” Mr. Snyder said. “It’s about helping communities and municipalities do the best they can to survive during difficult economic times.”

The issue has divided Benton Harbor. Jeremy Connell, who leads the firefighters’ union, said he is anxious about negotiations for a new contract. He dislikes some of Mr. Harris’s plans (the combined police-fire services could be unsafe, he says). “But then I think, what choice do we have?” Mr. Connell said.

On a recent afternoon, Mr. Harris, 67, who has moved into a rented apartment here, juggled a frenetic schedule.

With his broadened powers, he has removed members from the planning commission and a brownfields authority board and installed his own choices. He is privatizing management of the water department.

His vision for the fire department? “They don’t get paid for just being here, they get paid for doing things,” he said. That said, Mr. Harris also says he understands the benefit of collective bargaining, and is not out to take that away. (For the record, he has voted for Democrats in the past, but says his worries about “extremes” in both parties mean he probably would not classify himself with either for now.)

Mr. Harris’s job is temporary, until the city is found by the state to be on its feet, and some people here appear to be counting the moments until he leaves. Several commissioners seethed as they described how Mr. Harris this month issued a blunt written directive permitting the commission only to meet, to approve the minutes of their meetings and to adjourn — but to conduct no real city business.

One commissioner glowered at Mr. Harris (whom the city is required to pay $11,000 a month under his state contract) when they crossed paths in City Hall.

But Mr. Harris says he is focused on the prospect of Benton Harbor breaking even this year, and is undeterred by any hostility.

“That’s all a distraction,” he said. He seemed puzzled by all the fuss over his recent dealings with the commissioners; he has simply informed them, he said, of how Michigan has broadened the reach of emergency managers.

“All I told them was, ‘Hey, guys, you have no authority,’ ” he said.

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